Inside The Last Days Of Abramovich’s Reign At Chelsea FC

Inside the Premier League’s rather modest headquarters in Gloucester Place, London, the league’s soccer-obsessed staffers are busy preparing for the forced sale of Chelsea FC, a process expected to kick-off today despite the U.K. bank holiday weekend. Over the coming weeks an army of London suits will pass through the stuffy offices of soccer’s richest league to push through the sale of one of the country’s most famous clubs, a consequence of sanctions imposed on club owner Roman Abramovich following Russian President Vladimir Putin’s unprovoked invasion of Ukraine in February.

Thursday night, as the deadline came and went, bids arrived on the desk of Bruce Buck, Chelsea’s chairman, from all-star clusters of billionaires and business leaders that include a Facebook cofounder, a ex-Disney CEO, a beer tycoon and famous names from the NBA and NFL. Missing from the list: the Ricketts family, owners of MLB’s Chicago Cubs, who pulled what many thought was the most promising bid, but also the one least loved by Chelsea fans. The family said it decided not to make the offer because of “certain issues” and “unusual dynamics around the sales process,” while a source close to the bid told Forbes that it failed because an agreement couldn’t be reached within the consortium itself, which included billionaires Ken Griffin, founder and CEO of Citadel, and Cleveland Cavaliers owner and mortgage tycoon Dan Gilbert.

For the three groups now left in the game, the hard part is over. One of them is headed to London, sources say, but two are laying low, their phones silent for now, while Premier League and government workers scurry to finalize the sale before the end of the month, when the club runs out of money. What we’re waiting for now is the completion of a due diligence process that involves sanctions, billionaires, government departments and a soccer club supported by millions around the world. It’s a process that even insiders say is too weak, too ineffectual and just not fit for purpose in 2022, even in normal circumstances.

The circumstances around the sale of Chelsea are anything but normal. The price of around $4 billion will be the biggest acquisition of a sports team ever, but current owner Abramovich will be waving goodbye to the club after 19 years under a cloud. Because of the sanctions, Chelsea is caught in the U.K. government’s headlock, and its future as a competitive sporting force is in real jeopardy. The race is now on to get the club sold, a process that the U.K. government has designed to prevent Abramovich from pocketing a penny of the money paid, or collect any of the $2 billion owed to him by the club.

Next up is due diligence. The league’s job as the first port of call in the sale process is to vet the buyers, who all hail from the U.S. or U.K. business establishment. That should ease the burden on Premier League executives, who don’t have the auditing expertise of firms like EY or PWC that would normally be used in a transaction of this size. The league’s Owner’s & Directors’ test is a famously relaxed process that typically entails asking prospective owners if they are rich enough to own a Premier League club and if they have a criminal past, a qualification easily met by most wealthy buyers, even those with connections to an oil-financed regime or one with a questionable record on human rights.

The tougher test will be getting through the process of the government’s Department for Digital, Culture, Media and Sport (DCMS), which will issue a new license that will relax the sanctions and allow the sale to move ahead, a process that will no doubt be slowed by the caution of civil servants in an otherwise unknown U.K. government bureaucracy terrified of being the one who drops the ball on this. The final challenge is with the Treasury, specifically the Office of Financial Sanctions Implementation, which will handle the billions of dollars paid and ensure that when the club changes hands, the money lands in an account of their choosing without any payments landing with Abramovich or any other sanctioned individual. Of the three actors–the Premier League, the DCMS and the Treasury–only the Treasury has a track record of operating under these extreme circumstances.

While perhaps not ideal, it can only help the government, the league and the club put an end to the anxiety around the sale and the ticking financial time bomb they’re all facing. A wage bill due at the end of April means Chelsea will need a cash infusion of around $39 million just to keep the wolves from the door, according to Kieran Maguire, a soccer-finance lecturer at the University of Liverpool. “Could Roman Abramovich at any one point in time over the course of the next few months turn around and say, ‘I’ve had enough of all this,’ and decide to stop funding the club? Yes.” Maguire adds that as the months pass by, exactly how the wage bill for April, May, June and July will be paid is a real “cause for concern.”

None of the bidders for Chelsea offered comment on whether or not they would assume responsibility for paying club salaries before formally taking ownership even if they were the preferred bidder. This might change. But the risk to Chelsea remains real, making the speed with which the Premier League can do due diligence a paramount concern.

The end game for all is to put a decisive end to the Abramovich era and give Chelsea a fresh start.

“The American owners have seen what FSG have done at Liverpool on a transfer budget that is significantly lower than Chelsea, Manchester United and Manchester City and they will try to replicate that,” Maguire says of the Fenway Sports Group that owns the Boston Red Sox and Pittsburgh Penguins but is best known for putting the reds of Liverpool back at the top of English soccer. But there will be money to spend, including the badly needed revamp—or replacement—of the club’s aging Stamford Bridge stadium, the kind of investment U.S. team owners are familiar with but the kind of project that could cost another $1 billion.

So what’s the attraction? The U.S. bidders are here because, according to Maguire, “If you take a look at the asking price for Chelsea—somewhere in the region of £2.5 ($3.27) to £3 billion ($3.9)—and you benchmark that against U.S. sport franchises, Chelsea actually looks very cheap. That has encouraged U.S. investors. They feel that the commercialization of football is undersold as far as the U.K. is concerned.”

But English football is everywhere, so where is there any money left to be made? The U.S. bidders are “very bullish” when it comes to generating alternative income streams through soccer. The eyebrow-raising world of NFTs and the adoption of Web3 technology, feels like money for nothing, with fans paying the price for an otherwise worthless asset. But in soccer you can see the appeal. Manchester United in the pre-Covid year of 2019 generated $820 (£627 million) revenue on a fanbase of around 1.1 billion people. “You’ve only got to come up with one successful web-based product or way of engaging with fans and you can double that money,” Maguire says, “And now you’re talking about a completely revamped business.”

No matter how the Chelsea sale plays out, it’s likely to put extra pressure on the Premier League to figure out a way to conduct more rigorous due diligence on potential owners. For now, the task has fallen on the slim shoulders of those least capable of getting it done—and the Premier League itself has said as much. Speaking to politicians in March, Helen MacNamara, the Premier League’s chief policy officer, told MPs that the league “recognize[s] the case for change” when it comes to how clubs are sold and bought in England’s top tier. Her comments only supported the fire of criticism that the Owners & Directors’ test, introduced in 2005-2006, is simply no longer fit for purpose, and was not tough enough to, for example, ask questions of oligarchs with ties to Putin and sovereign wealth funds linked to autocracies with shocking human rights records.

The test’s biggest critic is one of the world’s most visible non-government organizations, Amnesty international, who called out the Premier League in August 2020, claiming that “complicity in war crimes, torture, slavery or human trafficking” is no bar to Premier League club ownership. Kate Allen, Amnesty’s director, said the league “urgently needs to get its house in order.” Evaluating well-known American faces (bidders like Stephen Pagliuca and Todd Boehly) and the genteel house-cat members of the U.K. establishment (Sir Martin Broughton and Lord Sebastian Coe) is a much easier task, especially when looking into buyers who have already been vetted by the NBA, NFL or Serie A, for example. However, a sweeping reform of the ownership test is not expected to arrive in time for the Chelsea sale, if ever. As Maguire, the soccer-finance lecturer at the University of Liverpool, explains, “There is a reluctance amongst Premier League owners to have a more onerous Owners and Directors test because at any one time there’s usually two or three of them looking for the exit route. The last thing they want to do is to reduce the pool of respective owners because [then] you reduce the potential price from the sale of the club.” The Premier League, unsurprisingly, will be working more closely with Amnesty when the rules of the test are eventually rewritten.

As for the fans, they will certainly miss an owner prepared to lose $1.1 million a week on the club, even though his connection with Chelsea FC had started to fade years before sanctions were imposed. Today, Chelsea is just another problem Abramovich wants solved in the wake of asset seizures around the world, Maguire says. Certainly, “there will be more of an emotional loss [compared] to some of his other assets. But remember he also hasn’t attended a match at Stamford Bridge for a couple of years.

“Abramovich could have attended some matches if he really wanted to during that period and he chose not to,” Maguire says. “There were clearly more important things, ultimately, than what Chelsea football club meant to him.”

A spokesperson for Chelsea did not immediately respond.